Human resources management is a collection of practices and policies focused on getting maximum productivity from employees. Human resources management practices have strategic and operational components. The strategic practices are focused on bringing the maximum positive impact on business outcomes. In contrast, the operational practices aim to bring maximum efficiencies to handling human resources issues. Both strategic and operational practices aim to impact business outcomes positively.
Human resources management encompasses various practices that cover the recruitment and selection of staff into the organization, training and development, compensation and benefits management, and employee relations management. The Human Resources department oversees these practices for the organization's benefit.
Human resources management is commonly referred to as HR. The human resources management field was previously referred to as personnel management. The field is evolving with more modern terms, such as human capital management, being used. Despite the changes in names over the years, human resources management's core functions and principles remain the same, largely encompassing the management of people at work.
One common trend emerging from human resources management is focusing more on strategic human resources management. It seems now the focus is on the strategic impact of human resources management. This has seen many HR professionals calling for HR to be given a seat on the executive level.
The current state of human resources management
The COVID-19 pandemic has rapidly transformed the HR function, necessitating its crucial role in navigating the challenges posed by the "Great Resignation" and shifts in the labor market. According to interviews conducted with CHROs, more than 90% anticipate significant changes to the HR operating model within the next two to three years. To adapt to these changes, HR must transform by embracing organizational principles and key performance indicators that align with core business functions. The future HR operating model will likely involve leveraging digitalization to elevate HR's impact, fostering agility and flexibility within organizations, redefining the role of business partners, and prioritizing enhancing the employee experience. HR must become a genuine strategic partner, serving as a bridge between the workforce and the organization in theory and practice. This evolution will enable HR to effectively address emerging challenges and contribute to the organization's overall success.
Organizations have responded to the COVID pandemic and many other challenges by implementing remote work, reallocating resources, and embracing digitalization and automation. HR leaders should prioritize four key trends to shape the future of their organizations: fostering stronger connections, embracing automation, reducing transaction costs, and adapting to demographic shifts. Future-ready companies excel in understanding their identity, operating with agility and simplicity, and enhancing their capacity for learning and innovation. HR is crucial in facilitating positive change in organizational identity, agility, and scalability to contribute to this transformation. McKinsey's research has revealed a strong correlation between positive employee experience and organizational outperformance. According to their findings, organizations that prioritize HR practices that enhance employee experience are 1.3 times more likely to report higher levels of organizational success. This highlights the significant impact that a positive work environment can have on overall company performance.
Objectives of human resource management
Human resource management is there to optimize organizational performance and achieve organizational objectives through planned employee satisfaction. Dyer (1995) notes that bundles of human resource activities are more important in enhancing labor productivity than any single activity. Saa-Perez (2002) found that human resource decisions integrated into systematic human resource processes have an important influence on the development of organizational capabilities and the firm's performance.
Human Resources Management(HRM): The Origin and History of HRM
The origin of human resources management can be traced back to the shift from "personnel management" to "human resource management" in the 1980s. Legge (1995) notes that the term "human resource management" was first used by US academics and managers and quickly gained popularity among managers and academics in the UK. Storey (1988) examines the absorption process of human resource initiatives into organizations with well-developed industrial relations practices and procedures.
Human resource management (HRM) emerged as a result of the human relations movement in the early 20th century. This movement focused on finding ways to create business value through strategic workforce management. Initially, HRM primarily involved transactional tasks like payroll and benefits administration. However, due to globalization, company consolidation, technological advancement, and further research, human resources now focus on strategic initiatives like mergers and acquisitions, talent management, succession planning, industrial and labor relations, and diversity and inclusion.
Human Resources Management (HRM) and It importance to organizations
Rahsel (2022) argues that human resource management is crucial in achieving organizational goals through planning, organizing, human resource development, directing, and controlling functions. Goswami (2018) emphasizes the importance of human resource management in recruiting, orienting, and appraising personnel and highlights the need for strategic decision-making at the highest level of the organization. Aslam (2014) notes that human resource management practices have become indispensable for modern businesses, highlighting 21st-century HR managers' challenges. Liu (2007) concludes that human resource management adds significant value to organizations, particularly when human resource systems are emphasized and decisions are tied to strategy.
Human Resources Management (HRM) and Organizational outcomes
Certain human resource management (HRM) practices positively impact business performance or organizational outcomes. The impact of human resources management on business performance is an issue that has been under debate for a while.
Delaney (1996) found that HRM practices such as training and staffing selectivity were positively associated with perceptual firm performance measures. Abdullah (2009) found that training and development, teamwork, HR planning, performance appraisal, and employee security positively and significantly influenced business performance.
Huselid (1995) found that High-Performance Work Practices significantly impacted both intermediate employee outcomes and short- and long-term measures of corporate financial performance. Ramos-Torres (2017) also found that High-Performance Work Practices decreased employee turnover and increased productivity, which had a positive financial impact on the organization.
One meta-analysis study investigated the association of human resource management (HRM) practices with financial, market, and operational performance. The study found that the average correlational of HRM practices with financial, market, and operational performance was 0.305, 0.434, and 0.311, respectively. The study highlights the importance of investing in human resources to improve organizational performance.
In a study by Subramony (2009) titled "A meta-analytic investigation of the relationship between HRM bundles and firm performance," the research findings suggest that human resource management (HRM) bundles, which consist of multiple complementary practices, have a significant impact on business outcomes. The study found that HRM bundles, such as empowerment, motivation, and skill-enhancing practices, affect business outcomes more than individual best practices. These bundles are positively related to various business outcomes, including retention, operating performance, financial performance, and overall performance ratings. The effect sizes of HRM bundles are comparable to or even larger than those of high-performance work systems.
A study titled: Training and organizational performance: A Meta-analysis of Temporal, institutional and organizational context moderators had interesting findings. The research found a positive and direct relationship between training and organizational performance. Organizations that invest in employee training tend to have better overall performance. The study did not find any statistically significant difference between the impact of training quality and training quantity on organizational performance. Both aspects of the training were equally important in influencing performance outcomes. The relationship between training and organizational performance exhibited a strengthening trend over time.This suggests that the positive effects of training may accumulate and become more evident as time progresses. The research revealed that the country's performance orientation influences the relationship between training and organizational performance. This means that cultural factors related to how a country values and prioritizes performance can impact the effectiveness of training initiatives. The cost of labor in a country was found to moderate the relationship between training and organizational performance. Higher labor costs were associated with a stronger positive relationship, indicating that organizations in countries with higher labor costs may benefit more from investing in employee training. The study did not find evidence for the moderating effects of the industry/sector, organizational size, and technology intensity on the relationship between training and organizational performance.
From the above evidence, human resources management (HRM) can impact business or organizational performance. The various HRM practices bring different impacts to the organization. It is, therefore, valid to conclude that those organizations that invest in good human resources management practices are likely to outperform those that do not.
How are human resources management(HRM) practices structured?
Human resources professionals manage an organization's human resources management (HRM) practices. The job titles of people leading the human resources function in an organization vary by sector and sometimes by organization size. I have equally noted variations in job titles among HR professionals based on countries.
The job titles of people who lead human resources management in organizations vary depending on the organization's size, industry, and cultural values. Alam (2015) found that HR professionals in large companies in Malaysia mostly perform their tasks as "administrative experts" and less as "strategic business partners." Bhal (2002) identified four roles for HR professionals in Indian organizations: strategy integrator, efficient administrator, nurturant patron, and proactive transition facilitator. Nugroho (2022) identified six duties of human resource management: staff procurement, human resource development, compensation management, occupational safety and health, labor relations, and industrial relations. Overall, the papers suggest that the role of human resource management is to manage the individual aspects of the employment relationship, from employee recruitment and selection to international employment relations, salaries, and wages.
The structure of the human resources department can affect organizational performance. Shah (2015) identifies seven management functions of HR departments that can impact organizational performance, including staffing, performance appraisals, compensation and benefits, training and development, employee and labor relations, safety and health, and human resource research. Anwar (2021) found that decentralization positively affects organizational performance.
Human Resources Management(HRM) Trends
The Human Resource Management (HRM) market is projected to experience a robust growth, with a compound annual growth rate (CAGR) of 12.7% anticipated from 2023 to 2030.The market is driven by the digitization and automation of human resource processes, efforts by enterprises to attract the right pool of applicants and manage resources efficiently, and advancements in modern technologies such as predictive analytics, machine learning, and artificial intelligence. The demand for HRM software and services is also expected to grow due to the application of predictive analytics and the adoption of remote working practices. Overall, the market outlook for human resource management is positive, with evolving solutions and trends shaping the industry.
Research has revealed other notable trends in the field of human resources management. The papers suggest that human resources management is subject to several trends and changes. Strauss (1987) identifies two conflicting trends in HRM: high-commitment policies that develop broadly trained employees and corporate restructuring that discourages investment in human capital. Belout (2001) identifies new trends in Canadian HR, including new roles for HR, globalization, work-life issues, and pressure to demonstrate usefulness to the organization. Mushkudiani (2020) discusses global, economic, and technological HRM trends, including freelancers, social networks, and game features in training and recruitment. Lawler (2015) provides a twenty-year analysis of global trends in HRM, concluding that HR is most powerful when it plays a strategic role, uses information technology, has tangible metrics and analytics, and integrates talent and business strategies.
Human resource management (HRM) has undergone significant changes and trends in different countries. Richbell (2001) discusses the UK scene, where cost-driven and competitiveness-enhancing HRM practices have increased labor flexibility, downsizing, and outsourcing. Konrad (2001) discusses the US scene, where HR professionals are realizing the need to update their technological skills and develop systems for managing more virtual organizations. Finally, Morgan (1988) discusses trends in international HRM, where external factors on a national and international level have an increased impact on HRM operations. HRM is a dynamic field and keeps evolving to meet meets the demands of organizations.
Technology and Human Resources Management(HRM)
Many companies have adopted e-HRM, a digital approach to human resource management. This meta-analytic review integrates research on the antecedents, consequences, and moderators of e-HRM. The findings suggest that system usefulness, organizational resources, users' knowledge, and social influence facilitate e-HRM adoption. Additionally, social factors have incremental validity in predicting e-HRM adoption beyond technology, organization, and people factors. Implementing e-HRM positively relates to overall organizational performance, particularly operational performance. Moderating factors such as organizational size and IT infrastructure influence the relationship between e-HRM and performance outcomes.
The World Economic Forum published the "Human-Centred AI for Human Resources: A Toolkit for Human Resources Professionals" to scale the responsible use of artificial intelligence in Human Resources (HR). The toolkit will assist organizations as they venture into artificial intelligence. The toolkit provides examples of tech-enabled solutions for three areas of action: talent sourcing and selection, organizational analysis and monitoring, and employee experience, reward and development. It also suggests questions to ask technology providers to ensure their products are unbiased and effective. The toolkit emphasizes the need for sound judgement and evidence-based evaluation and testing to realize the potential and minimize the risks of new workplace technologies.
Frequently Asked Questions on Human Resources Management (HRM)
What are the 5 roles of HR?
I looked at four top research papers, and they provide different perspectives on the roles of HR. Hailey (2005) provides an overview of empirical research on the link between HRM and performance. Ulrich (1998) argues that HR should focus on business results that enrich the company's value to customers, investors, and employees. Liebowitz (2010) suggests that HR can facilitate a comprehensive approach to creating a sustainability and environmental stewardship culture. Sparrow (2013) argues that HR can influence sustained engagement by supporting managers as expert engagers of others. None of the papers provides a definitive list of the five roles of HR. However, they collectively suggest that HR can drive organizational performance, sustainability, and engagement.
What is HRM and its objectives?
I reviewed a few top research papers, and they offer different perspectives on HRM and its objectives. Boxall 2007 provides an overview of HRM as a significant field that has emerged from its earlier roots in personnel management, industrial relations, and industrial psychology. Guest 1987 argues that HRM should be defined in a way that differentiates it from traditional personnel management and allows for the development of testable hypotheses about its impact. Pinnington 2000 provides a textbook introduction to HRM that covers all the main elements of the field and encourages critical thinking on theory and practice. Finally, Podgorodnichenko 2020 discusses the role of HRM in developing sustainable organizations and highlights the challenges that arise from pursuing divergent organizational goals. Overall, the papers collectively suggest that HRM is a complex and evolving field that involves managing people to achieve organizational goals while also considering the needs and interests of employees and other stakeholders.
What are the 7 main function of HR?
Some of the top research papers collectively suggest that HR has seven main functions. These functions include: attracting, motivating, and retaining talent (Coleman 2018); providing leadership in developing and maintaining leadership and management capability (Davenport 2015); hiring, developing, and retaining employees to meet business objectives (Santhanamani 2013); managing succession planning and competency development, and driving business performance (Cheese 2008).
Human resources management has evolved from personnel management to its strategic role in organizations. The emergence of digital tools in human resource management has greatly influenced human resources' impact on business outcomes. Human resources management practices drive the organization's performance and its role is likely to grow, given the transformation in how human resources practices are delivered.